What If You Win the Lotto? Why the Date of Separation in a Divorce Matters

Through the lens of a crazy case about dividing lottery winnings, see why the separation date before a divorce can be critical.

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Separating couples can be forgiven for focusing on the date their divorce becomes final. However, there are financial reasons why the date of separation is just as—if not actually more—important. Courts in many states use this as an important deciding factor when it comes to issues related to property division, child support, and alimony.

Big Bucks Before Separation: The Rossi Case

Consider the famous California case of In re Marriage of Rossi. In early November 1996, Denise Rossi—who would eventually get divorced from her then husband Thomas—joined a $5-a-week lottery pool with co-workers. She contributed for three weeks before withdrawing, but in late December, the pool won a $6.6 million jackpot.

Denise was allowed to keep her share ($1.3 million paid across 20 annual installments). Afraid to tell her husband, she used her mother's address to receive checks and correspondence from the California Lottery. "I knew he would try to take the money away from me," explained Denise. "I went to the Lottery Commission and told them I was contemplating divorce. They told me to file before I got my first check, which I did. I believed the lottery winnings were my separate property because they were a gift."

In January 1997, Denise filed for dissolution of marriage without ever telling her husband about the jackpot. Thomas wasn't represented by an attorney in the divorce; the divorce was finalized in April 1997.

In 1998, Thomas filed for bankruptcy. But a year later, he received a letter relating to Denise's lottery winnings. This was the first he'd heard of any jackpot. As one tends to do in these sorts of situations, he hired a lawyer. Denise's attorney made it clear his client refused to share any "meaningful" amount of the lottery winnings.

Denise said that the lottery winnings were her separate property as her share had been a gift, and that she had already been separated from Thomas at the time of the jackpot. Ultimately, the court found Denise had intentionally failed to disclose her winnings, which were actually community property, and that her actions had, among other things, constituted fraud. (The court noted that her failure to disclose the money violated the couple's marital settlement agreement.) As a result, the court awarded Thomas all of the lottery winnings.

What Is the Date of Separation?

So, as you can see, date of separation is crucial. But how is it actually defined? That will vary by state, but typically it's considered the date that spouses no longer live together as a married couple.

How Does the Separation Date Affect Finances?

In most states, any income that a spouse earns during the marriage is considered marital property (also "joint property" or "community property"). Essentially, each spouse has a claim to the income the other earned during the marriage (barring any prenup).

This right doesn't apply to income earned after the date of separation. But it's important to note, as we saw with the Rossi case, what really matters is when income was earned—not paid out.

As with income, other types of property acquired during the marriage will also be considered joint. Homes, cars, boats, and the like will need to be divided either fairly or 50/50 if you live in a community property state like California.

The date of separation can also determine when a spouse becomes responsible for child support and/or alimony.

For the full breakdown on the importance of the date of separation, including other ways a couple can be considered separated, click here.